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CAHNERS TITLES SHOULD ENHANCE AD DEALS AT K-III

K-III Communications Corp. is expected this week to finalize its $180 million acquisition of properties from Cahners Publishing Co., including American Baby, Modern Bride, Sail and seven other consumer magazines.

For K-III, the acquisition fills in some gaps in its stable of special-interest and consumer titles-which will now number about 50-and enables the company to create more package deals for advertisers. At the same time, it gives K-III added clout on newsstands.

"We're quietly getting up there with the big guys," said Harry McQuillen, president-CEO of K-III Magazines. "The only companies ahead of us in terms of retail sales on newsstands right now are TV Guide, National Enquirer and Star, and Time Inc."

Mr. McQuillen said the deal will enable K-III to surpass two other newsstand giants, Hearst Magazines and Conde Nast Publications.

On the ad front, K-III's Seventeen and New Woman could be packaged with Modern Bride for beauty advertisers, while Automobile Magazine could form similar package deals to help newly acquired Sail and Power & Motoryacht, Mr. McQuillen said.

Industry executives familiar with the deal estimate the titles have annual revenue of around $100 million and cash flow of about $15 million-giving the deal a multiple of 12 times earnings.

When the deal is finalized, about 25 people, or 5% of Cahners' New York-based staff of 525, are expected to be cut. About 200 are expected to join K-III, while the rest will remain with other Cahners titles, including Variety and Broadcasting & Cable.

Neal Vitale, currently VP-general manager of the Los Angeles-based Variety Inc. unit, is expected to have his responsibilities expanded this week to include Broadcasting & Cable. John Beni, 63, senior VP of Cahners' disbanding consumer magazine group, will leave the company.

For Cahners, the sale marks the formal end of its failed strategy to build a consumer magazine division that would generate $500 million a year in revenue and rival its trade magazine wing.

Ironically, one of the companies that consistently thwarted Cahners' expansion efforts on the consumer front was K-III.

The biggest face-off came in mid-1991, when K-III's dealmakers outmaneuvered Cahners and convinced Rupert Murdoch to include The Daily Racing Form with a package of eight consumer magazines that News Corp. sold for $650 million.

Cahners, not willing to up its price to include the racing newspaper, never seemed to get its consumer magazine expansion efforts back on track.

Last June, Cahners parent Reed Elsevier announced a worldwide divestment of its consumer publishing properties that has raised about $1.2 billion to date.

K-III now has a hefty $1.2 billion in long-term debt, but has grown annual revenue to more than $1 billion and in November sold out its initial public offering at $10 a share. Share price hit nearly $12 by yearend 1995.

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K-III's purchase

MAJOR TITLES

Modern Bride (6X/year, 370,000 rate base)

Power & Motoryacht (12X, 157,000)

Sail (12X, 180,000)

American Baby (12X, 1.6 million)

Healthy Kids (6X, 1.5 million)

First Year of Life (annual, 3.2 million)

Childbirth (annual, 2 million)

First Time Parents (quarterly, sponsored by Hasbro)

Grandparents Today (sponsored by Fisher Price)

As Your Baby Grows (annual, sponsored by Mead Johnson)

OTHER PROPERTIES

American Baby Basket Pre-Natal (product samples and printed matter)

American Baby Basket Post Natal (distributed in hospitals)

Especially for Mothers (packet of coupons mailed to new mothers 6X/year)